Sunday, August 26, 2012

Review of Barron's -- Dated 27 August

Just keep the power on, FPL..., and we will be business!  Isaac so far is throwing just enough wind and rain at us to keep us inside.  The good of that?  I can write...


Barron's Cover Story's title ("Best & Worst Run States") sure does have an allure to it...  Who is Number 1 (best)?  South Dakota!  Who is Number 50 (worst)?  Connecticut!  I would not have guessed Connecticut, but then I don't live there...

Author Andrew Bary looks at the risks now facing muni-bond investors in the 50 states.  Bary quickly notes that Warren Buffett has closed out his $8 billion of municipal derivatives contracts (that is, he "is bullish no more" (Andrew Bary)).  [ed. note:  Wait a moment!  Was it not Buffett who YEARS ago said that derivatives were weapons of mass financial destruction?  And yet he still plays with them?  Careful there Warren!]

Andrew Bary then goes on to write about the financial health of our various states, gathers some opinions from experts and produces a nice table of the health of the 50 states based on adding up "Debt to GDP" and "Unfunded Pension Liability to GDP" and then combining them to give usa measure of the various states' health.  I cherry-pick states of interest below (from his table):

Debt and
Above AAA
Bond Ratings
10-Year Munis
to GDP (%)
(basis points)
South Dakota
North Carolina
New York

Note that there is not a really good correlation between Bary's Liabilities / GDP measurement and the bond ratings and spreads paid by the states above.  California has the nation's lowest bond rating (S&P A-) and Illinois is second worst (S&P A+).

But the table (and article) are good for thought.  Nice job, Mr. Bary!


Alan Abelson titles his column "Bullish on Bullion", but it takes him a while to get tot the bullion...  He first takes a rather long swipe at the much deserving Todd Akin (running for Senator from Missouri against Democrat Claire McCaskill).

Abelson then goes on to write about what we may soon see out of Europe and what Uncle Ben (Bernanke) has in store for us.  Then he mentions gold's recent run-up, tying it to hedge-fund operators John Paulson and George Soros getting into gold (the GLD exchange traded fund anyway).  [Abelson does not mention the shootings of miners in South Africa however, which may also have played a part in gold's price increase]  He then writes that he is bullish on gold anyway, even if Paulson and Soros had NOT bought the GLD...

He finishes his piece this week with comments (negative) on China and writes his own table re the China Flash Manufacturing Purchasing Managers Index.  Things look pretty bad (all indicators are negative.  Abelson: "So forgive us if we repeat our increasingly rhetorical question -- hard landing, anyone?"  [Michael "Mish" Shedlock has been all over China's peril for months now]


Jacqueline Doherty ("Streetwise") writes about the danger of high dividend stocks.  The trade, it looks like, is getting very crowded, these stocks have high P/Es...


In this weekend's "Review & Preview" there is an item on Australia and commodities.    BHP Billiton has shelved at least $40 billion of expansion plans as many there believe that the commodities boom is now over.

"He Said":

"Housing is on the mend. We do, however, remain cautious in our optimismas we believe consumer confidence remains fragile."

Toll Brothers Executive Chairman Robert Toll

William Waitzman writes a short piece noting that we are seeing more strikes recently.  Labor feels more confident, so workers are more likely to go on strike now.


Christopher C. Williams writes a bullish case for Weyerhaueser (ticker: WY).  WY converted to become a REIT in 2010 (I missed that memo, I had thought it was just a plan).  Their timber is priced very cheap and the dividend could go up 50% (from 2.4% to 3.6%) he writes.  But, the state of HOUSING still bothers me..., same with Robert Toll's opinion just above.


Alexander Eule takes the reins at "Technology Week" and writes about various ideas concerning Apple TV. Apparently no one (outside of Apple (AAPL)) really has any idea of what AAPL is up to.  They may make their own TVs.  Or the equivalent of cable boxes.  And it appears that AAPL will partner with the cable companies.  Stay tuned...


Erin E. Arvedlund talks with Jason Cross, a hedge-fund manager.  Jason is "bullish on America", but does not want to talk much about what he holds (big companies) other than to mention that Wal-Mart Stores (WMT), Cisco (CSCO), Lockheed Martin (LMT) and IBM are in his portfolio.


Dimitra DeFotis writes a bearish piece on HP.  Seems they are weak now, and a price war in PCs is coming...


Jim McTague writes an article on "Failed Trades" ("Stand and Deliver").

McTague: "Every day, thousands of trades fail because investors are unable to deliver the securities and realted transaction data that brokers need to consummate the deals."

This is a problem he writes, in that investors could have their money tied up for days.  And nobody on Wall Street seems to care much, nor do the regulators seem to care much either.

But, failed trades could wind up being a big problem in our "flash crash markets"...


Gene Epstein ("Economic Beat") offers up various explanations that have been offered regarding our slow recovery.  The last one he looks at is quite interesting: recent research has shown that the freer and economy is, the more likely it will outperform.  The (Canada based) Fraser Institute has been showing that the USA's economic freedom has been going downhill (bad) since 2000...


David Englander writes that Curtiss-Wright (yes, the company traces its roots to the Wright Brothers and early aviation pioneer Glenn Curtiss) is "primed for takeoff".  The company is diversifying into other industries than just defense work.  Hey, maybe.


Leslie P. Norotn interviews Jerrold Senser (CEO and CIO of Institutional Capital).  Senser picks five stocks that could jump 20%, he likes these because they are solid companies:

Texas Instruments (TXN)
Novartis (NVS)
Cummins (CMI)
Johnson Controls (JCI)

I won small holdings of CMI (which I really like, CAT has taken themselves out of the truck diesel engine market) and TXN.


Lawrence C. Strauss write this weekend's "CEO Spotlight", this time about Hormel (HRL) -- think Spam!  HRL's CEO is Jeffrey Ettinger.

One pattern I have begun to notice in these CEO Spotlight articles is how little meaning there is about where you went to college...  Or even your grades (from an earlier edition).  And also how almost every CEO examined by Barron's has worked in various divisions of big companies, not just one division all the way up to the top.


Washington DC pro Jim McTague, doing double duty, writes up ("D. C. Current") and shows how one demographer is calling the election for Romney now.  The demographics are based on detailed studies on teh 3100 counties in USA.  McTague provides Morgan's map showing Romney getting 299 electoral votes, Obama 211 with 28 undecideds.  270 are needed to win.

I would dispute putting MD (Maryland?  MD voting for Romney?) and MO (Todd Akin) in the Republican column however, that takes 20 electoral votes off right there, not counting other possible surprises.


Editor Thomas Donlan takes a shot at government mismanagement...  Both re the farm drought (this dorught is the worst since the 1950s) and the increasingly serious water shortages out West.  Donlan would like to see water prices go UP, as that would wind up cutting usage (in California 80% is used by agriculture, 10% by consumers (and a lot of that is fopr watering lawns...) and 10% by industry).  Donlan: "The right price is always easy to find, using Vanderbilt's rule: What will the traffic bear?"

Donlan then writes a short piece on maybe jumping off the "Fiscal Cliff" might not be such a bad idea after all...  It would cut the deficit almost in half right away!  He points out that various presidents have tried using big spending to get us out of recessions (or even trying prevent us from getting into them).

My own preference would be to cut the deficit mainly by cutting spending.  But, going over the Fiscal Cliff would be better than another slimy deal that keeps our trillion dollar plus deficits going and going, which i fear will be EXACTLY what will happen.


Barron's this weekend published a special section on The Top 100 Independent Financial Advisors.  Yes, Ric Edelman wins as Number One again!  Other than Ric Edelman (who also has a radio show), I have recognize NO OTHER names in the Top 100.


In the Market Section Vito Racanelli notes the first decline in the markets in several weeks, part of it due to HP results and outlook, but also due to concerns over Bernanke and some tech bombs like Zynga (ZNGA) and Facebook (FB).  He then goes on to write positively of KBR, spun off from Halliburton some time ago.  KBR gained notoriety (negative) because of its logistical services for the US military in Iraq.  KBR is winding down that business and is more involved with LNG (liquified natural gas), which appears to be a growth business.  [ed. note: Natural gas is starting to look like a pretty good good component of our energy future]

"European Trader" author Jonathan Buck writes optimism in Europe will not last (last weekend he wrote positively of German companies though).  Greece and whether Germany will save them...  He did NOT write that stocks will go down in Europe, but that optimism won't last.

Kopin Tan ("Asian Trader") writes that China has gotten beaten down as buyers leave...  The earlier mentioned China Flash Manufacturing PMI was part of this.  China's stocks are down 2/3rds since their highs in 2007 (the USA is close to where we were).  Mr. Tan then goes on to mention Macquarie (Hong Kong) analyst Shuwei Kwek's top pick: China Communications Construction, a top port builder and dredger in China (but expanding to other countries as well).

Reshma Kapadia ("Emerging Markets") writes on each of the four BRICs.  China: cheap, internet plays might be good.  India: higher quality companies and good demographics.  Russia: Europe may slow them down, but high oil prices will help them.  Brazil: the economy has slowed down (as have commodity exports) so maybe consumer stocks might be a better bet.  A quick snapshot of all the BRICs on one page!

Michael Aneiro ("Current Yield") finally writes a column about how little "news" there is, just speculation about Fed policy, etc.    I am sure that there will be LOTS of news soon re interest rates, and that Michael will be a busier guy before long...

Alexandra Wexler writes this weekend's "Commodities Corner".  She notes that an "El Niño" seems to be forming, and that is bad news re the cocoa crop (hot dry summers in West Africa, the main producer of cocoa).  O/T, but the term "El Niño" originates from Peru, where heavy rains typically strike dry northern Peru around Christmas every few years.

Insiders dumped about $54 million of Dick's Sporting Goods (DKS) stock, and a Sirius XM Radio (SIRI)  insider dumped about $40 million worth.

The Mighty Peruvian Sol was not so mighty last week: falling a tiny 0.1%.  Geez, if this keeps up, I may have to give up the red bolding...  Peru IS exposed to China and the overall commodities markets.  As Brazil has slowed recently, Peru might slow down as well.  The country has been growing about as fast as China has over the last 10 or so years.

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